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Credit cards have a privacy problem

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Re: Credit cards have a privacy problem

#41

Post by mehrdadn »

kccqzy wrote: post #40
mehrdadn wrote: post #37

Earlier quoted context omitted.

> Enough of them wind up over-extending and paying interest to make it lucrative. Yes. I understand this. I'm asking, why do they keep the others ' accounts open? > I'm also not aware of any across-the-board 5% rewards cards I'm not either, but many people just rotate to a different card instead of using the same card for less cash back. And who never miss a payment or rack up interest. Meaning they always use those…

> why do they keep the others' accounts open? It's a loss leader.

Even for people who have years of history showing they have no intention of taking the bait?

Re: Credit cards have a privacy problem

#42

Post by kube-system »

mehrdadn wrote: post #31
ilikehurdles wrote: post #27

Earlier quoted context omitted.

I’m not aware of any card that gives flat out unconditional 5% cash back. You sometimes have these elevated award rates but for very specific merchant partners, limited periods of time, with some cap on the total amount received, or limits on how the reward can be redeemed. The base cash back on reward cards hovers between 1 and 2 percent, even ones with high yearly fees (another area where the margin for the issuer…

Nobody said unconditional. You just rotate the cards in your wallet and use whatever 5% category fits your purchase. You might not do this, but there are people who do, and never pay interest. They clearly operate at a loss for the company year after year. I'm asking why their accounts aren't closed.

Because for every person who signs up and causes them a loss, there’s dozens of others enticed by the same rewards programs who make them a profit. Credit card companies aren’t having any problems being profitable.

I would imagine the number of people who only purchase things that are in the 5% category on their card is extremely small.

Re: Credit cards have a privacy problem

#43

Post by gnaritas »

mehrdadn wrote: post #11
mandelbrotwurst wrote: post #8

Earlier quoted context omitted.

It's closer to 3%, and I don't think there's a way to beat that on the cash back except on a per category basis. Also, a lot of folks end up carrying a balance in spite of their best intentions. I suspect this happens relatively often even for folks with a long history of not doing so - e.g. maybe you get fired for the first time and start running up a balance, not long before you've run up some significant interest…

It's around 2% https://www.valuepenguin.com/what-credit-card-processing-fee... And then there's huge credit card bonuses like $150 for Chase Freedom which is like $7.5k of spending's worth... But again, that doesn't really answer my question. I very much realize lots of people do pay interest. But there are also people who don't, and possibly never have, for many years. I'm asking why do they keep those people around…

They do bring value, the same value a lottery winner brings to the lottery; that it's possible and people do win (or can always avoid interest paying off balance) keeps everyone else trying thinking they'll be the lucky one (they'll always pay off their balance). If you refused these people, then there's less incentive to play their game. People don't like games that can't be won, but they appear to like games with terrible odds in favor of the house that can be won.

Re: Credit cards have a privacy problem

#44

Post by kccqzy »

I've discovered this problem by finding out that you can sign up for additional cash back on apps like Yelp and Dosh. When you make a purchase these companies will automatically determine whether this purchase is eligible for cash back. I'm guessing they must be buying the data for all my transactions for the purpose of figuring out whether they would give me cash back. It immediately made me suspicious since I'm getting cash back from a third party instead of from a bank.

Re: Credit cards have a privacy problem

#45

Post by mehrdadn »

kube-system wrote: post #42
mehrdadn wrote: post #31

Earlier quoted context omitted.

Nobody said unconditional. You just rotate the cards in your wallet and use whatever 5% category fits your purchase. You might not do this, but there are people who do, and never pay interest. They clearly operate at a loss for the company year after year. I'm asking why their accounts aren't closed.

Because for every person who signs up and causes them a loss, there’s dozens of others enticed by the same rewards programs who make them a profit. Credit card companies aren’t having any problems being profitable. I would imagine the number of people who only purchase things that are in the 5% category on their card is extremely small.

> Because for every person who signs up and causes them a loss, there’s dozens of others enticed by the same rewards programs who make them a profit.

That's the answer to the question "why are these cards offered at all", which was not my question.

My question was, "why are even the accounts of people who consistently cause them a loss still kept open?", which this doesn't answer.

Re: Credit cards have a privacy problem

#46

Post by ceejayoz »

mehrdadn wrote: post #41
kccqzy wrote: post #40

Earlier quoted context omitted.

> why do they keep the others' accounts open? It's a loss leader.

Even for people who have years of history showing they have no intention of taking the bait?

I suspect you're overestimating how many of those there are.

Re: Credit cards have a privacy problem

#47

Post by ilikehurdles »

mehrdadn wrote: post #31
ilikehurdles wrote: post #27

Earlier quoted context omitted.

I’m not aware of any card that gives flat out unconditional 5% cash back. You sometimes have these elevated award rates but for very specific merchant partners, limited periods of time, with some cap on the total amount received, or limits on how the reward can be redeemed. The base cash back on reward cards hovers between 1 and 2 percent, even ones with high yearly fees (another area where the margin for the issuer…

Nobody said unconditional. You just rotate the cards in your wallet and use whatever 5% category fits your purchase. You might not do this, but there are people who do, and never pay interest. They clearly operate at a loss for the company year after year. I'm asking why their accounts aren't closed.

Those merchants likely have a special contract with the card issuer to be a partner with the card issuer. Travel brands lock in repeat brand-loyal customers with mileage rewards. Some of those cards have hundreds of dollars of yearly fees, and the cardholders are spending more overall to negate the impact of the fee. Even so with rotating cards it’s easy to end up in a place where you don’t get your money’s worth or just barely beat the fee. If your card gets you 5% rewards and costs $400 a year, and you come out of the year with $600 in rewards, you’re up $200 overall while the issuer got $400 from you and $300 out of a 2.5% merchant fee, so they’re still up $100. That’s all assuming every one of your purchases was a 5% reward purchase. The issuers margin goes up every time you use their “Shop With CardCo” shopping portal where merchants pay more money to advertise through, or take advantage of other partner deals.

The people churning enough to actually cost the issuer money are extremely rare and there are a lot of people making sure it stays that way.

And then there are folks who get hit with interest and late fees that subsidize the big churners.

Re: Credit cards have a privacy problem

#48

Post by nemothekid »

mehrdadn wrote: post #31
ilikehurdles wrote: post #27

Earlier quoted context omitted.

I’m not aware of any card that gives flat out unconditional 5% cash back. You sometimes have these elevated award rates but for very specific merchant partners, limited periods of time, with some cap on the total amount received, or limits on how the reward can be redeemed. The base cash back on reward cards hovers between 1 and 2 percent, even ones with high yearly fees (another area where the margin for the issuer…

Nobody said unconditional. You just rotate the cards in your wallet and use whatever 5% category fits your purchase. You might not do this, but there are people who do, and never pay interest. They clearly operate at a loss for the company year after year. I'm asking why their accounts aren't closed.

>* I'm asking why their accounts aren't closed.*

Because, churners, are a very small portion of the 20B in revenue Visa generated last year, of which it generated a ~50% profit margin.

The system works so well already, why rock the boat by closing the accounts of a few thousand individuals? It would probably cost more to enforce any such rule than they lose in revenue.

Re: Credit cards have a privacy problem

#49

Post by kube-system »

mehrdadn wrote: post #45
kube-system wrote: post #42

Earlier quoted context omitted.

Because for every person who signs up and causes them a loss, there’s dozens of others enticed by the same rewards programs who make them a profit. Credit card companies aren’t having any problems being profitable. I would imagine the number of people who only purchase things that are in the 5% category on their card is extremely small.

> Because for every person who signs up and causes them a loss, there’s dozens of others enticed by the same rewards programs who make them a profit. That's the answer to the question "why are these cards offered at all", which was not my question. My question was, "why are even the accounts of people who consistently cause them a loss still kept open?", which this doesn't answer.

1. Because those people who were enticed by that program might no be enticed to sign up in the first place if it says “5% cash back (unless you take advantage of this in which case we cancel your account)”

2. I bet government regulators might be a bit peeved by a company that systematically cancels customer accounts for behavior which is within the advertised terms of the agreement. Usually regulators frown upon luring customers in with an advertisement for a product/service and then purposefully sidestepping said product/service.

3. It’s probably such a small number of customers that’s it’s just not even worth their time.

Re: Credit cards have a privacy problem

#50

Post by mehrdadn »

ceejayoz wrote: post #46
mehrdadn wrote: post #41

Earlier quoted context omitted.

Even for people who have years of history showing they have no intention of taking the bait?

I suspect you're overestimating how many of those there are.

I suspect you're underestimating? A lot of people (around half of Americans if not more) don't carry a balance. I don't know what fraction of them try to extract the most from their cards, but judging from the sheer number of websites that explain what card you should get to maximize which reward and bonus, I'm skeptical that the number of people who pay attention to this is negligible enough that it'd cost companies more to simply close their accounts than to let them go on.
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